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The Future of Litigation Finance Tokenization 

Blockchain software technology and cryptocurrency innovation continues to evolve with intriguing potential to modernize legacy legal systems and processes. The potential for tokenizing legal assets continues to be a focus in building next generation litigation finance solutions.  KluwerArbitration.com recently profiled New York based Ryval’s mission to design a stock market for litigation finance. Traditionally, the litigation investment community has been tough to break into. Future endeavors in expanding access to litigation investment aim to apply tokenization of litigation claims as a crowdfunding exercise.  Ryval’s goal is to offer a platform to buy, sell and trade crypto tokens that represent partial ownership of litigation assets. Ryval’s tokenization concept for litigation investment aims to provide non-accredited investors the ability to access third party funding investment opportunities. Ryval’s funding agreements are still evolving, given various factors specific to jurisdictional regulations, but the firm’s vision seems to support an extremely fluid and highly liquid token ecosystem.   Blockchain software technology is being engaged by many in the industry to support tokenization of litigation assets. Firms like Ryval employ blockchain as a tool to efficiently scale platform operations and facilitate investor diversification, while mitigating risk. Ryval suggests thousands of individuals could invest in shares of claims. If the claim is successful, blockchain technology offers seamless access to payouts. 

Insurance Firms Engage Dispute Funding Solutions 

Traditionally, insurance firms have made an effort to forgo dispute funding as a finance tool, operating under the assumption that claim investment would increase case risk. With greater public awareness of third party investment solutions, many insurance firms are beginning to broaden their approach to dispute funding agreements, engaging solutions to finance claim recovery.  OmniBridgeway.com recently published research on the value of litigation finance tools specific to the insurance industry. According to Omni’s insights, insurers are beginning to realize the benefits of working with funders to structure portfolio architectures, allowing for risk mitigation. Ultimately, the most innovative insurance companies are now building dispute portfolios that serve as legacy cash generating assets. Many insurers welcome the comfort of working with a large funder who has deep expertise in claim success. Furthermore, insurance companies are engaging various products to fit individual needs, such as recovery claims associated with warranty and indemnity policies.    Omni’s team of experts are successful portfolio builders, according to the report. As such, some insurers are selling whole portfolios to funders when regulation permits. Omni has prompted some insurance firms to conduct internal audits to unlock potential assets to be funded for a hopeful recovery.  

There’s More Than One Way for a Funded Claim to End

Modeling various endgame trajectories is a worthwhile exercise in maximizing client/funder relationships, while mitigating financial risk. Likewise, relationships often evolve over time, and circumstances may call for exploring alternative endgame models. Successful funders often detail a variety of recovery scenarios after winning a claim, offering clients the opportunity to explore and execute the most beneficial strategy for their needs.  ValidityFinance.com recently featured considerations for claimants and funders alike to debate the planning and preparation of various endgame strategies. In particular, funders maintain unique opportunities to strategically position each litigation asset inside of a multifunctional portfolio arrangement; keen portfolio planning can have a significant impact on overall returns.  Recovery of judgment awards may be delayed by appeals or other post trial motions. Depending on the scenario, clients may opt for a discounted agreement with their funder for quicker access to capital. Insurance opportunities for funders are growing in popularity and have the opportunity to overlap with recovery of claim awards. Banks and private lenders typically do not lend capital against unpaid judgements. However, lenders do offer loan options that leverage a case’s insurance policy. Market rates for such loans on claim insurance policies range from upwards of 5%, lending up to 80% of the policy value.    

Construction Litigation Finance is Undervalued

Given the granular complexities comprising construction blueprints, some firms organize their profit centers by navigating the margins of enterprise construction mismanagement. Construction claim conversion is currently undervalued, according to a new report published by Augusta Ventures and FTI Consulting.  The joint report details a significant public awareness divide between the construction industry and broader litigation finance industry. According to the report’s insights, leaders large and small in construction have heard about third party funding solutions that have resolved cases in construction, however, many firms in the construction industry have yet to embrace how litigation finance can impact their bottom line for the better. What’s more, customers who have been defrauded by the proverbial bad construction contractor are remarkably undervalued in terms of leveraging ligation finance tools to claw back losses from crooked construction companies.  Check out the complete Augusta Ventures - FTI Consulting report on construction, to learn more.

The 6th Anniversary of the Peter Thiel / Hulk Hogan / Gawker Case: What Have We Learned?

This week marks the sixth anniversary of Terry Bollea (AKA professional wrestler Hulk Hogan) suing Gawker media for publishing a sex tape of him with a married woman. The suit made national news not just for its salacious nature—but because of the questions it raised regarding privacy versus journalistic freedom. Once news emerged that billionaire and PayPal co-founder Peter Thiel was funding Hogan’s claim, the case became even more sensational. In this piece, we’ll take a look at exactly what happened in the case, and how it impacted (or hasn’t impacted) Litigation Finance. The Facts of the Case In 2007, Gawker, a website known for celebrity scandals and salacious content, published a piece with the headline: “Peter Thiel is totally gay, people.” Was this newsworthy? Did the piece have journalistic integrity? Reasonable people can disagree. Peter Thiel is in fact gay, which means the truth of the article protected Gawker from a libel suit. In 2009, an outed Thiel gave an interview in which he called Gawker ‘destructive,’ even as he acknowledged that the site wasn’t focused on ruining him personally. Thiel also speculated that Gawker maintained a disdainful attitude toward Big Tech, and may be focusing on punishing industry leaders as a result. Fast forward to 2012, when Gawker published a lewd video featuring wrestler Hulk Hogan (AKA Terry Bollea) having sex with Heather Clem—wife of radio personality “Bubba the Love Sponge.” This led to Bollea suing the media outlet for infringement of rights of publicity, invasion of privacy, and intentional infliction of emotional distress. Bollea was represented by famed Los Angeles attorney Charles Harder. The published video, which Bollea claims was recorded without his knowledge or consent, contained a 2-minute section of a 30+ minute video—ten seconds of which included explicit sex acts. In 2016, Forbes magazine revealed that it was indeed Peter Thiel who was bankrolling Bollea’s case against Gawker. Speculation soared over what was viewed by many as Thiel’s revenge against Gawker for outing him. Did he want to ruin the media company, or purchase it, or simply malign the company that caused him personal and professional anguish? Thiel maintained that his involvement was philanthropic at heart, and meant to protect people from being bullied by unscrupulous media outlets. If anything, the lawsuit was meant to deter Gawker from intentionally releasing damaging content that lacked legitimate news value. Gawker founder Nick Denton, who was named personally in Bollea’s claim, made a statement about Thiel’s involvement in the case: “Just because Peter Thiel is a Silicon Valley Billionaire, his opinion does not trump our millions of readers who know us for routinely driving big news stories.” Also in 2016, a jury awarded Bollea compensatory damages of $115 million, plus punitive damages of $25 million—finding Gawker liable. A few months later, Gawker filed Chapter 11 bankruptcy, and began looking for a buyer. Several media outlets owned by Gawker were sold. By November 2016, Gawker and Bollea reached a settlement of $31 million. Today, Gawker’s flagship gossip site is still active. Gawker media sold off several of its prominent sites including Gizmodo, Jezebel, Deadspin, and io9. The LF Connection The case itself was of particular interest in and around the Litigation Finance community. Opponents of third-party legal funding asserted that Thiel’s actions in the case laid out an effective blueprint for the very wealthy to bankroll frivolous, but eye-catching cases. Billionaires could, some posited, use their wealth and legal connections to target specific companies, forcing them into bankruptcy. This speculation took place alongside the typical accusations that third-party litigation funding could clog court dockets with meritless actions meant to be quick paydays for funders and their clients. For example, Peter Sheer, a First Amendment expert, suggested that Thiel and others might abuse the power of third-party legal funding to intimidate media outlets. According to Sheer: “Winning is the ultimate chilling effect, but if you can’t win the case, you at least want the editors to think twice before writing another critical story about you.” To the keen-eyed observer though, it’s clear that Peter Thiel neither incited this case, nor had any real control over its outcome. Bollea initiated the case before Thiel’s involvement. At the time the case was decided, the jury was unaware that Bollea had a benefactor. And since the jury ruled in favor of Bollea, not Gawker, it’s clear that the case had merit. Thiel was always adamant that funding Bollea’s case (to the tune of $10 million) was about deterrence, not revenge. He explains that he wanted to “fight back” against Gawker’s practice of damaging reputations and bullying those with no means to pursue a claim to conclusion. As Thiel explains, “...even someone like Terry Bollea, who is a millionaire and famous and a successful person didn’t quite have the resources to do this alone.” While one could view Thiel’s actions as being contradictory to the principles of free speech—he disagrees. In fact, Thiel has donated to free speech defenders like the Committee to Protect Journalists. Thiel maintains that there is a profound difference between journalism in the public interest, and the type of media Gawker traffics in. That’s why he decided to take action. Thiel told the New York Times, “It’s less about revenge and more about specific deterrence. I saw Gawker pioneer a unique and incredibly damaging way of getting attention by bullying people even when there was no connection with the public interest.” Now, six years after the case has concluded—what have we learned? We haven’t seen a rash of billionaires funding cases, frivolous or not, with the intention of bringing down specific companies. That’s not to say billionaires aren’t financing claims the way Thiel did, only that they aren’t doing so publicly. Unlike traditional litigation funders, Thiel did not stand to make any money from Bollea’s lawsuit. Technically, Thiel should still be considered the litigation funder, though his term sheet wouldn’t be one most funders would want to imitate. The Gawker case has not led to a slew of frivolous, funded claim. Among other reasons, it simply doesn’t make financial sense to invest in a case lacking in merit. Bollea’s accusations against Gawker were affirmed by the jury, which resulted in a large award. So this claim was meritorious, even if Thiel’s motivation for funding the claim were not ROI-based. Media outlets are not cowering en masse over fears of punitive lawsuits from billionaires. That was much ado about nothing. Holding media outlets accountable for what they print (and occasionally, their motivations for doing so) is a vital and essential part of the free press. Free speech is not freedom to print anything—even something as personal as a sex tape—merely as an attention-getting device. Final Takeaways Can a lawsuit fall under the purview of Free Speech? Thiel believes so, and many others agree. This case addressed questions of privacy, free speech, and litigation funding. The end results demonstrated that we are all entitled to some element of privacy—even the celebrities among us. The Gawker case also affirmed that litigation funding still serves the interests of justice by enhancing the ability of claimants to bring lawsuits when they are wronged. The takeaway here should be that Peter Thiel afforded Hulk Hogan access to justice. Of course, when a billionaire backs a professional wrestler against a media company, sometimes the moral of the story can get lost beneath the headlines.
The LFJ Podcast
Hosted By Tony Webster |
In this episode, we spoke with Tony Webster, CEO of UK-based litigation funding and ATE insurance portal Sentry Funding. Tony described his personal access-to-justice story which led him to the litigation funding industry, and illustrated how Sentry's portal works, and the advantages it provides both funders and solicitors in need of funding. He also explained why Sentry is choosing to focus on the smaller end of the claims market--GBP 500,000 and below. [podcast_episode episode="9625" content="title,player,details"]

£2m Football (Soccer) Litigation Investment Fund

A new £2m fund has been launched to help those in the football (soccer) industry fund litigation expenses when they have been wronged by the industry. The creators of the fund highlight the international talent pool associated with the business of football, which they claim is sometimes at the detriment of players’ best interests. Bankrolling a case all the way to FIFA’s Court of Arbitration for Sport seems to be the fund’s driving mission.  LawGazette.co.uk reports that Harbour Litigation has teamed up with Morgan Sports Law to fund a forecasted 60 football related litigations in the near future. Players or others represented by the fund will have no financial risk or responsibility associated with their case if unsuccessful in navigating the courts.  Morgan Sports Law has been credited with several high profile case wins in football litigation, one of which earned significant damages against the World Anti-Doping Agency that clearned France international Mamadou Sakho of anti-doping violations.  Harbour Litigation claims to be the world’s top private third party litigation investment firm, dedicated to litigation and arbitration support. Founded in 2007, Harbour has funded litigation in 14 jurisdictions worldwide representing over 130 individual cases.

Regulating Litigation Finance to Manage Social Inflation

There is an ongoing argument against the global litigation finance community purporting that litigation investment is a key driver of social inflation. Many critics of the growing litigation finance ecosystem include lobbyists who aim to usher in strict regulation, possibly targeted at dampening innovation in the space. Keeping this in mind, the idea that litigation finance prompts social inflation is counter-intuitive, according to a new report.    CarrierManagement.com’s insights explore a multifaceted deep-dive look into litigation finance regulation as a social inflation mitigation tool. The logical premise contends that ligation investors must review the metrics of each case for funding. The business case for litigation finance hinges on third party investor’s high certainty of the claimant’s case success. Therefore, social inflation fails the logic test, at the most basic level.  CarrierManagement.com’s research does suggest that mindful regulation in the space is necessary for litigation finance to thrive well into the future. However, Carrier seems to suggest that litigation finance is an investment in social capital, rather than social inflation. 

Omni Bridgeway launches US Judgment Enforcement business, expands global enforcement team

Omni Bridgeway (formerly known in the US as Bentham IMF) is pleased to announce the launch of its US Judgment Enforcement business.
Omni Bridgeway, the most experienced multi-disciplinary foreign judgment enforcement provider in the world, launches its Judgment Enforcement services business in the US with three key appointments and further expansion pending, building on the company’s 35-plus year track record in global enforcement. We are delighted to welcome Hannah van Roessel as Senior Investment Manager, Director Enforcement - US in New York. Since 2013, Hannah has served as Director Enforcement & EMEA, Senior Legal Counsel in the Amsterdam office of Omni Bridgeway’s litigation and global enforcement funding business, with a notable record of managing active enforcement cases and securing recoveries in contested settings. Hannah brings significant hands-on experience with the cross-border recognition and enforcement of arbitral awards on the basis of the New York Convention in a large number of jurisdictions, especially against sovereigns and semi-sovereigns.
Jeff Newton joins Hannah in Omni Bridgeway’s New York office as Investment Manager and Legal Counsel responsible for expanding the company’s US judgment enforcement initiatives. Jeff was a litigator at Kobre & Kim LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP where he represented parties in a wide range of complex commercial cases across financial fraud, crypto, defaulted debt, technology, environmental, pharma, insurance, and reinsurance matters. He has represented clients on the plaintiff and defense side in civil and class action lawsuits and helped recover assets internationally.
Rounding out the team responsible for advancing the company’s US enforcement business is Gabe Bluestone, who also joins the team as Investment Manager and Legal Counsel in New York. Gabe was previously a Shareholder and litigator at Bluestone, P.C., a leading asset recovery law firm with offices in Washington D.C. and New York, where he also maintained a robust business litigation practice. While in private practice, Gabe represented a global roster of clients in commercial disputes and in enforcing judgments, often seeking injunction-predicated relief, striking down fraudulent conveyances, and unravelling fraudulent corporate schemes.
Andrew Saker, Managing Director & CEO and Chief Strategy Officer - US notes “Omni Bridgeway’s global leadership in judgment enforcement is unparalleled in terms of the results we deliver clients. We are excited to officially launch our enforcement business in the US with the arrivals of Hannah, Jeff, and Gabe. Our dedicated US team will serve as an on-the-ground resource for clients in devising, managing, and executing cross border enforcement strategies, working closely with colleagues in North America, and researchers and asset tracers worldwide.”
ABOUT OMNI BRIDGEWAY  Omni Bridgeway is the global leader in litigation financing and managing legal risk, with expertise in civil and common law legal and recovery systems. With international operations based in 20 locations, Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery.
Omni Bridgeway is listed on the Australian Securities Exchange (ASX:OBL) and includes dispute funders formerly known as IMF Bentham Limited, Bentham IMF and ROLAND ProzessFinanz, and a joint venture with IFC (part of the World Bank). For more information visit www.omnibridgeway.com.